Correlation Between Indofood Sukses and Tri Continental

Can any of the company-specific risk be diversified away by investing in both Indofood Sukses and Tri Continental at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Indofood Sukses and Tri Continental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indofood Sukses Makmur and Tri Continental PFD, you can compare the effects of market volatilities on Indofood Sukses and Tri Continental and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Indofood Sukses with a short position of Tri Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indofood Sukses and Tri Continental.

Diversification Opportunities for Indofood Sukses and Tri Continental

-0.51

Correlation Coefficient

Indofood Sukses  Tri Continental

Excellent diversification

The 3 months correlation between Indofood and Tri is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Indofood Sukses Makmur and Tri Continental PFD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tri Continental PFD and Indofood Sukses is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Indofood Sukses Makmur are associated (or correlated) with Tri Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tri Continental PFD has no effect on the direction of Indofood Sukses i.e., Indofood Sukses and Tri Continental go up and down completely randomly.

Pair Corralation between Indofood Sukses and Tri Continental

Assuming the 90 days horizon Indofood Sukses Makmur is expected to generate 6.43 times more return on investment than Tri Continental. However, Indofood Sukses is 6.43 times more volatile than Tri Continental PFD. It trades about 0.08 of its potential returns per unit of risk. Tri Continental PFD is currently generating about -0.01 per unit of risk. If you would invest  2,395  in Indofood Sukses Makmur on September 25, 2024 and sell it today you would earn a total of  135.00  from holding Indofood Sukses Makmur or generate 5.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Indofood Sukses Makmur  vs.  Tri Continental PFD

Indofood Sukses Makmur

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Indofood Sukses Makmur are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, Indofood Sukses showed solid returns over the last few months and may actually be approaching a breakup point.

Tri Continental PFD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tri Continental PFD has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Tri Continental is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Indofood Sukses and Tri Continental

The main advantage of trading using opposite Indofood Sukses and Tri Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indofood Sukses position performs unexpectedly, Tri Continental can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Tri Continental will offset losses from the drop in Tri Continental's long position.

The idea behind Indofood Sukses Makmur and Tri Continental PFD pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Correlations module to find global opportunities by holding instruments from different markets.